Yehua Dennis Wei and Chi Kin Leung, “Development Zones, Foreign Investment, and Global City Formation in Shanghai,” Growth and Change, XXXVI (2005), 18.
5. Tatsuyuki Ota, “The Role of Special Economic Zones in China’s Economic Development as Compared with Asian Export Processing Zones: 1979–1995,” Asia in Extenso (2003), available at www.iae.univ-poitiers.fr/EURO-ASIE/Docs/Asia-in-Extenso-Ota-mars2003.pdf (accessed 8 February 2008).
6. Wei Ge, “Special Economic Zones and the Opening of the Chinese Economy: Some Lessons for Economic Liberalization,” World Development, XXVII (1999), 1270.
7. Ota, “Role of Special Economic Zones,” 19.
8. Ge, “Special Economic Zones,” 1272.
9. Ibid., 1277.
10. See “Beijing Declaration of the Forum on China-Africa Co-operation (Draft)”
(17 November 2000), available at http://test.fmprc.gov.cn/eng/wjdt/2649/t15775.htm (accessed 24 April 2008); “Programme for China-Africa Cooperation in Economic and Social Development,” available at www.focac.org/eng/wjjh/hywj/t157834.htm (accessed 24 April 2008).
11.

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Quoted in Alec Russell and William Wallis, “Beijing Puts Quiet Pressure on Sudan,” Financial Times (19 June 2007), 6.
58. Global Insight, “Woodside Spuds Offshore Well; Kenya’s Oil Future to Be Determined in 2007,” available at www.globalinsight.com/SDA/SDADetail7703.htm (accessed 7 January 2008).
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martyn j. davies
7
Special Economic Zones:
China’s Developmental
Model Comes to Africa
A new developmental model is in the process of being rolled out in key African countries—Special Economic Zones (SEZs). They provide liberalized investment environments focused on strategic industries to attract foreign companies. The model of dedicated geographical zones where investing companies enjoy preferential economic policies is by no means unique.
Numerous African governments have established or are establishing such zones in their countries in an attempt to attract foreign direct investment (FDI), especially in labor-intensive manufacturing industries.

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Investment in African manufacturing industries will be the next wave of Chinese investment on the 07-7561-4 ch7.qxd 9/16/08 4:17 PM Page 153
Special Economic Zones
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continent. Initially, this approach will be centered on the SEZs, but it will expand to include the surrounding economy, market conditions allowing.
Beijing envisions that these SEZs, serving as hubs for Chinese economic activity in Africa, will offer a package of favorable incentives for Chinese businesses and serve to reduce investment risk on the continent, while at the same time becoming the new growth nodes of the African economy.
Notes
1. Gao Shangquan and Chi Fulin (eds.), New Progress in China’s Special Economic Zones (Beijing, 1997), 3.
2. Ibid., 10.
3. Ibid., 3.
4. Yehua Dennis Wei and Chi Kin Leung, “Development Zones, Foreign Investment, and Global City Formation in Shanghai,” Growth and Change, XXXVI (2005), 18.
5.

Instead, the large-scale supply chain integration of the country is taking off. The most visible—and growing—signs of this shift are its special economic zones. Kaesong employs over fifty thousand North Koreans producing parts for the automaker Hyundai, as well as watches and shoes at wages far lower than in China. One foreign investor I met runs a factory there that makes DVD players, which North Koreans then take home to watch smuggled videos from the South. If sanctions were lifted on exports of computer parts and other electronics coming out of Kaesong, the zone’s honest revenues could surge from $500 million to billions of dollars annually. In 2014, Kim Jong Un announced that each North Korean province should develop its own special economic zone as well; they have no choice, because Pyongyang provides the outer cities and regions with almost nothing.

…

WORLDMAPPER
http://www.​worldmapper.​org
Worldmapper filters quantitative data through algorithms to produce unique cartograms that rescale geographies to depict their significance according to themes such as wealth, emissions, and Internet access.
WORLD MIGRATION
http://www.​pewglobal.​org/​2014/​09/​02/​global-migrant-stocks/
Pew Research Center’s interactive map shows migration figures based on origin and destination countries for the years 1990, 2000, 2010, and 2013.
Insert
To download color versions of the maps in the insert, click here.
1. THE NEW NODES: SPECIAL ECONOMIC ZONES (SEZS) MUSHROOM AROUND THE WORLD
Credit pai1.1
Nearly four thousand special economic zones (SEZs), export processing zones (EPZs), free trade zones (FTZs), and other industrial hubs compete over global supply chains, boosting exports and helping economies climb the value chain.
2. CHINA BUILDS SUPPLY CHAIN COMPLEMENTARITIES ACROSS THE GLOBE
Credit pai1.2
China is now the largest trade partner of more than twice as many countries as America.
3.

Capitalism, he said, “has conjured up such gigantic means of production and of exchange, that it is like the sorcerer who is no longer able to control the powers of the netherworld whom he has called up by his spells.”3
In India the 300 million of us who belong to the new, post–International Monetary Fund (IMF) “reforms” middle class—the market—live side by side with spirits of the netherworld, the poltergeists of dead rivers, dry wells, bald mountains, and denuded forests; the ghosts of 250,000 debt-ridden farmers who have killed themselves, and of the 800 million who have been impoverished and dispossessed to make way for us.4 And who survive on less than twenty Indian rupees a day.5
Mukesh Ambani is personally worth $20 billion.6 He holds a majority controlling share in Reliance Industries Limited (RIL), a company with a market capitalization of $47 billion and global business interests that include petrochemicals, oil, natural gas, polyester fiber, Special Economic Zones, fresh food retail, high schools, life sciences research, and stem cell storage services. RIL recently bought 95 percent shares in Infotel, a TV consortium that controls twenty-seven TV news and entertainment channels, including CNN-IBN, IBN Live, CNBC, IBN Lokmat, and ETV in almost every regional language.7 Infotel owns the only nationwide license for 4G broadband, a high-speed information pipeline which, if the technology works, could be the future of information exchange.8 Mr.

…

The other major source of corporate wealth comes from their land banks. All over the world, weak, corrupt local governments have helped Wall Street brokers, agribusiness corporations, and Chinese billionaires to amass huge tracts of land. (Of course this entails commandeering water too.) In India the land of millions of people is being acquired and handed over to private corporations for “public interest”—for Special Economic Zones (SEZs), infrastructure projects, dams, highways, car manufacture, chemical hubs, and Formula One racing.10 (The sanctity of private property never applies to the poor.) As always, local people are promised that their displacement from their land and the expropriation of everything they ever had is actually part of employment generation. But by now we know that the connection between GDP growth and jobs is a myth.

…

The campaign is being handled by people who run a clutch of generously funded NGOs whose donors include Coca-Cola and the Lehman Brothers. Kabir, run by Arvind Kejriwal and Manish Sisodia, key figures in Team Anna, has received $400,000 from the Ford Foundation in the last three years.6 Among contributors to the India Against Corruption campaign there are Indian companies and foundations that own aluminum plants, build ports and Special Economic Zones (SEZs), run real estate businesses, and are closely connected to politicians who oversee financial empires that run into thousands of crores of rupees. Some of them are currently being investigated for corruption and other crimes. Why are they all so enthusiastic?
Remember, the campaign for the Jan Lokpal Bill gathered steam around the same time as embarrassing revelations by Wiki­leaks and a series of scams, including the 2G spectrum scam, broke, in which major corporations, senior journalists, and government ministers and politicians from the Congress as well as the BJP seem to have colluded in various ways as hundreds of thousands of crores of rupees were being siphoned off from the public exchequer.

At the end of 1978, the septuagenarian Chinese Communist Party leader Deng Xiaoping heaved himself into the top job, and in the months that followed he and his comrades introduced a series of economic reforms that ultimately changed the country beyond all recognition. Emulating other East Asian success stories like Singapore, Hong Kong, and Taiwan, party leaders laid the groundwork for “Special Economic Zones” that would invite in foreign capital and technology. They allowed private entrepreneurs to found small companies and opened up the country to an influx of information from the outside world. And in the all-important countryside, where the overwhelming majority of Chinese still lived, Deng and his colleagues began to allow the dissolution of the collective farms set up by Mao Zedong and permitted the peasantry to return to their old system of family farming.

…

The only local telephone was located in the village administration office, and placing calls was hair-raisingly frustrating business. The villagers, however, were extremely happy. When the production line was inaugurated, they killed a dog—a much-valued local delicacy—for a banquet to celebrate the occasion. The somewhat more fastidious Hong Kongers were bemused.32
The founding of Feng’s factory preceded the formal establishment of the Special Economic Zones (SEZ) on August 26, 1979—and that, in itself, says quite a lot about how development in China was progressing at this time. Even as Guangdong was pressing Beijing for formal latitude to manage its own affairs and attract foreign investors, the first contacts between the province and foreign investors were already being made.33
These areas were granted exceptional conditions to attract foreign investment, but they could also be easily quarantined from society as a whole.

The noted Indian economist, Jagdish Bhagwati, described his own governments’ policies from the 1960s to the 1980s as “three decades of illiberal and autarkic policies”—
in other words, the government sat hard on the market and did its best to prevent trade and investment.
China, on the other hand, worked hard to attract foreign investors and to make the most of the links with Hong Kong and its other neighbors. The plan was to create “special economic zones,” such as Shenzhen, where the normal rules of the command economy would not apply to foreign investors. At the same time, the infrastructure of the special economic zones could be improved quickly. That method perfectly complemented China’s
• 248 •
H O W C H I N A G R E W R I C H
connections with Hong Kong, Macao, and Taiwan: the zones were exclusively in Guandong Province, next to Hong Kong and Macao, and Fujian, next to Taiwan. Over half of all investment into China in 1990 came from the tiny country of Hong Kong, while Japan and the United States together supplied only a quarter.

…

Over half of all investment into China in 1990 came from the tiny country of Hong Kong, while Japan and the United States together supplied only a quarter. Further, almost half of all investment arrived in Guandong; Fujian was the second largest recipient. The city of Shenzhen, across the border from Hong Kong, was a fishing village in 1980
when it became a special economic zone. Twenty years later property developers were pulling down skyscrapers mid-construction to start building bigger skyscrapers. The Chinese say, “you’ll think you’re rich until you set foot in Shenzhen.”
Unfair and arbitrary as they were, the special economic zones worked well at attracting investors without turning the entire Chinese mainland upside down. They also provided a toehold for reforms to spread. Whenever the rules for foreign firms seemed to be working well, administrators started applying them to domestic firms within the zones.

The specific spaces into which activity has moved were not given in advance, but determined by a whole host of contingent and local factors, depending in part on so-called ‘natural’ as well as human resources and locational advantages (such as northern Mexico’s proximity to the US market). The specifics of state policies (such as investment in infrastructures, subsidies for investment, policies towards labour or the setting up of the ‘maquila’ zone legislation in Mexico and the ‘special economic zones’ designated after 1980 in China) have also played an important role.
The geography of this development and of the subsequent crisis has been uneven. Those countries that had been most profligate in promoting the housing bubble – the United States, Britain, Ireland and Spain – were the initial epicentres of the crisis but there were plenty of pockets elsewhere. The financial epicentres were New York and London, which had shared the lead in slicing, dicing and securitising housing mortgages and other forms of debt, and in constructing the financial instruments (chiefly collateralised debt obligations and special investment vehicles) for marketing and trading this debt along with the secondary mechanisms for insuring, hedging and swapping it.

…

This intricate physical and social geography bears the imprint of the social and political processes, as well as the active struggles that produced it.
The uneven geographical development that results is as infinitely varied as it is volatile: a deindustrialised city in northern China; a shrinking city in what was once East Germany; the booming industrial cities in the Pearl River delta; an IT concentration in Bangalore; a Special Economic Zone in India where dispossessed peasants revolt; indigenous populations under pressure in Amazonia or New Guinea; the affluent neighbourhoods in Greenwich, Connecticut (until recently, at least, hedge fund capital of the world); the conflict-ridden oil fields in the Ogoni region of Nigeria; the autonomous zones carved out by a militant movement such as the Zapatistas in Chiapas, Mexico; the vast soy bean production zones in Brazil, Paraguay and Argentina; the rural regions of Darfur or the Congo where civil wars relentlessly rage; the staid middle-class suburbs of London, Los Angeles or Munich; the shanty towns of South Africa; the garment factories of Sri Lanka or the call centres of Barbados and Bangalore ‘manned’ entirely by women; the new megacities in the Gulf States with their star-architect-designed buildings – all of this (and of course much more) when taken together constitutes a world of geographical difference that has been made by human action.

…

The urbanisation of China over the last twenty years has been hugely important. Its pace picked up after a brief recession in 1997 or so, such that since 2000 China has absorbed nearly half of the world’s cement supplies. More than a hundred cities have passed the 1 million population mark in the last twenty years and small villages, like Shenzhen, have become huge metropolises with 6 to 10 million people. Industrialisation, at first concentrated in the special economic zones, rapidly diffused outwards to any municipality willing to absorb the surplus capital from abroad and plough back the earnings into rapid expansion. Vast infrastructural projects, such as dams and highways – again, all debt-financed – are transforming the landscape. Equally vast shopping malls, science parks, airports, container ports, pleasure palaces of all kinds, and all manner of newly minted cultural institutions, along with gated communities and golf courses, dot the Chinese landscape in the midst of overcrowded urban dormitories for the massive labour reserves being mobilised from impoverished rural regions.

The city had been the birthplace of Chinese capitalism but also the cradle of the Cultural Revolution that had destabilized the country. To begin market-oriented reforms, Deng chose to bypass Shanghai. Instead, he would test his policies in an entirely new city of his own creation, called Shenzhen, that he ordered built on the border with Hong Kong, the British colony that had grown rich swiping businesses and businessmen from Shanghai during its Maoist stagnation. Deng designated Shenzhen as China’s first “Special Economic Zone,” a carve-out area where private enterprise and foreign investment would be encouraged in the Communist state.
To sidestep intra-Party ideological debates about communism and capitalism, East and West, Deng packaged his free-market zone in Shenzhen as a mere “experiment.” He was, as he aphoristically put it in a pair of exceedingly famous (if apocryphal) quotes, “crossing the river by feeling the rocks”; he didn’t care “if it’s a black cat or a white cat as long as it catches mice.”

…

As Yeltsin struggled with the massive task of moving a vast nation dotted with collective farms and unproductive state-owned factories toward a market economy, Mayor Sobchak rushed ahead with his vision for St. Petersburg. He called his city “the only Russian door to Europe” and dreamed of a St. Petersburg restored to its prerevolutionary role as Russia’s banking and financial hub. Sobchak hoped to turn St. Petersburg into a Special Economic Zone (SEZ) of the type he had seen on a trip to Deng Xiaoping’s China in his days as a professor—a city with special business regulations to woo foreign investment. The appeal of the SEZ concept for Sobchak was obvious: his West-facing city could finally be decoupled from Russia’s backward hinterlands.
Under Sobchak’s leadership, the city privatized its local businesses much faster than the rest of Russia.

…

Hoping to set things right, Shanghai officials lobbied their superiors in Beijing, urging them to reopen to the world China’s historic global gateway city and financial center.
Even Deng’s promarket political allies were wary of Shanghai. Some officials worried that unleashing China’s cradle of cosmopolitanism and revolution could upend their rule. Others fretted that the symbolism alone would aid their ideological enemies. Deng was already beset by antimarket factions within the Party who warned that his new Special Economic Zones for international investment would become “foreign concession zones” reborn. Though Deng had been able to overrule them in creating Shenzhen, the symbolism of their critique would be much more salient in Shanghai, a city that had actually been a grouping of foreign concessions during China’s “Century of Humiliation,” from the Opium War through World War II.
But the Shanghai city government kept pushing.

Today's political geographic conflicts are often defined as exceptions to that normal model, and many are driven, enabled, or enforced in significant measure by planetary computation: byzantine international and subnational bodies, a proliferation of enclaves and exclaves, noncontiguous states, diasporic nationalisms, global brand affiliations, wide-scale demographic mobilization and containment, free trade corridors and special economic zones, massive file-sharing networks both legal and illegal, material and manufacturing logistical vectors, polar and subpolar resource appropriations, panoptic satellite platforms, alternative currencies, atavistic and irredentist religious imaginaries, cloud data and social-graph identity platforms, big data biopolitics of population medicine, equities markets held in place by an algorithmic arms race of supercomputational trading, deep cold wars over data aggregation across state and party lines, and so on.

…

Modern state polities are defined as interior to their own circumscribing geographic partition, and their sovereignty is produced in the fragile image of that line's stability, even as that line remains reversible (all extrastate actors rely on that inversion and its convolutions). In the end, this economy of reversible partitions supersedes the integrity of external and internal borders, such that any polity is always an incomplete complex of smaller subpolities, defined for itself according to its own private exceptions, both inward and outward-facing: capital cities, special economic zones, overseas territories, embassies, local ordinances, and so on. Even with these buffers, the stability of state polity is always in question, because to the extent that the state suppresses its original constituting violence (war, revolution, settler colonialism), all future agents of subsequent exceptional violence against that state become ghosts of those first rites of legal absolution and self-exception, their most exacting patriots in a way.

…

A plurality of lines, both dividing and linking at once, might fold on itself in various ways and in these overlaps create irregular twisty grids, populated by air pockets of various sizes and identity, inside or outside, enclaves and exclaves. Lines are agents of geopolitical form and their various types (e.g., lines of flight, lines of intensification, lines of transformation and subdivision) curve into the frames that present geopolitics to itself: the border, fenestration, aperture, plan, section, elevation, orifice, capital city, special economic zone, demilitarized zone.28 When the nomic line that partitions polities from one another is looped, it too becomes a frame, and as a form of geopolitical design, these arrange and present political geography. For contemporary governance, the simultaneous unwinding and reinforcement of modern jurisdiction, and its fragile pairing of geography and law in mutually validating representational systems, hopes to organize the world according to certain framings, and it defends its drawings with force.

Second, the plenum gave more latitude to Chinese peasants to break free from the system of collective farms and to cultivate crops on individual plots through “side-occupations,” such as growing fruit and vegetables and raising livestock.7 Finally, the plenum made a nod in the direction of the need for a more independent judicial system to arbitrate the kind of disputes that would arise in a “new world of local commercial initiatives.”8
On paper, this was a very modest and tentative beginning to market-based reforms. Most of the measures that were to transform China into a powerhouse of the global capitalist system were to come later. The setting up of Special Economic Zones for foreign investors, which drove the manufacturing boom in southern China, was already being considered in 1979. But the zones were not mentioned at the plenum and did not really get going until the early 1980s. Other far-reaching reforms, such as the privatization of housing and the reform of state-owned industries, were still more than a decade away.9
Nonetheless, 1978 was still the critical turning point.

…

Economic progress was remarkably rapid. By 1985, China’s income from exports had reached $25 billion, up from $10 billion in 1978.10 As farmers were allowed more freedom, the countryside grew richer. It was claimed that in 1978 around 270 million or 28 percent of the population lived in poverty;11 by 1985 that number had fallen to 97 million or less than 10 percent of the population.12 The Special Economic Zones along the coast provided employment and higher incomes for millions of migrant workers as China sucked in manufacturing activity from the rest of Asia. By the early 1990s, China’s share of world trade had quadrupled since the beginning of the reform era. By 1993 China was receiving more foreign direct investment than any other country in the world.13 By 2008—when the global financial crisis struck—China was the undisputed workshop of the world: it was about to become the world’s largest exporter and sitting on top of the world’s largest foreign currency reserves.

…

By contrast, many experts in Asia swiftly saw that China was emulating the successful path of manufacturing and export-led growth that had been pioneered first by Japan and then by the other “Flying Geese” of East and Southeast Asia—Taiwan, South Korea, Hong Kong, Singapore, Malaysia, Thailand. Even if the bosses of the Chinese Communist Party were not, in late 1978, consciously emulating other Asian nations, the entrepreneurs whom they allowed to open factories in China’s new Special Economic Zones knew the formula. In many cases they were simply moving manufacturing operations wholesale from elsewhere in Asia to southern China.
But while there was an “overseas Chinese” business community that could help private enterprise to take root in China and then plug it into the international trading system, there was no equivalent “overseas Russian” community. The Soviet Union was also starting from a different situation.

The imposition of private property rights depends upon the existence of state powers and legal systems (usually coupled with monetary taxation arrangements) that codify, define and enforce the contractual obligations that attach to both private property rights and the rights of juridical individuals. There is a good deal of evidence that the coercive power of the state played an important role in opening spaces within which capital could flourish well before private property regimes became dominant. This was as true in the transition from feudalism to capitalism in Europe as it later became when the Chinese set up special economic zones for capitalist activity in southern China after 1980. But in between usufructuary and private property rights lies a plethora of common property or customary rights, which are often confined to a given polity (like a village community or more broadly across a whole cultural regime). These rights are not necessarily open to all, but they do presuppose sharing and cooperative forms of governance between the members of the polity.

…

The massing of centralised financial powers in the major centres of global finance (New York, London, Tokyo, Shanghai, Frankfurt, São Paulo etc.) is of significance, as is the long history of the flourishing of innovations in new territories like Silicon Valley, Bavaria, the so-called ‘Third Italy’ in the 1980s and so on, where the seeming liberty of manoeuvre and lack of regulatory control allow things to happen that might otherwise get constrained by stifling and dominant powers of state and corporate capital grown obese. So pervasive and palpable has this tension been that policymakers now seek to capture the possibilities of knowledge-based, cultural and creative economies by centralised initiatives that support the decentralisation and deregulation of economic and political power. This is what the central state’s creation of ‘special economic zones’ in China and India is supposed to be about. Elsewhere, development is left to local initiatives on the part of increasingly entrepreneurial local state or regional metropolitan apparatuses. The hope is to replicate the conditions that sparked the innovations behind the digital revolution and the rise of the so-called ‘new economy’ of the 1990s, which, in spite of the way it crashed and burned at the close of the century, left in its wake a radical reordering of capitalist technologies.

The airport is to Songdo what New York’s harbor or Chicago’s railyards once were. As John Kasarda and Greg Lindsay explain in their 2011 book Aerotropolis, Songdo was originally conceived as “a weapon for fighting trade wars.” The plan was to entice multinationals to set up Asian operations at Songdo, where they would be able to reach any of East Asia’s boomtowns quickly by air. It was to be a special economic zone, with lower taxes and less regulation, inspired by those created in Shenzhen and Shanghai in the 1980s by premier Deng Xiaoping, which kick-started China’s economic rise.15
But in an odd twist of fate, Songdo now aspires to be a model for China instead. The site itself is deeply symbolic. Viewed from the sky, its street grid forms an arrow aimed straight at the heart of coastal China. It is a kind of neoliberal feng shui diagram, drawing energy from the rapidly urbanizing nation just over the western horizon.

An elevator is coming up toward me, L M 2 3 4 5 6 and then DING and the doors open, and out steps a slacker who can only be Chaz, thousands of snowflakes caught in his hair, glinting in the light like he’s just stepped out of the Land of Faerie. He’s got kind of a peculiar expression on his face as he steps out of the elevator, and as we trade places, and I punch the button for the lobby, I recognize it: Chaz is happy. Happier than me.
In the Kingdom of Mao Bell or, Destroy the Users on the Waiting List (selected excerpts) (1994)
In the inevitable rotating lounge atop the Shangri-La Hotel in the Shenzhen Special Economic Zone, a burly local businessman, wearing a synthetic polo shirt stretched so thin as to be semitransparent, takes in the view, some drinks, and selections from the dinner buffet.
He is accompanied by a lissome consort in a nice flowered print dress. Like any face-conscious Chinese businessman he carries a large boxy cellular phone. It’s not that he can’t afford a “prawn,” as the newer flip phones are called.

…

The lounge spins disconcertingly fast—you have to recalibrate your inner ear when you enter, and I half expect to see the head of my Guinness listing. Furthermore, it is prone to a subtly disturbing oscillation known to audio engineers as wow. Outside the smoked windows, Typhoon Abe is gathering his forces. Shenzhen spins around me, wowing sporadically.
Thirty-one floors below is the Shen Zhen (Deep River) itself, which separates China-proper’s Special Economic Zone from Hong Kong and eventually flows into the vast estuary of the Pearl River. The boundary serves the combined functions of the Iron Curtain and the Rio Grande, yet in cyberspace terms it has already ceased to exist:
—The border is riddled with leased lines connecting clean, comfortable offices in Hong Kong with factories in Shenzhen, staffed with nimble and submissive girls from rural China.

…

Several more coders came out carrying mortars and began launching bombs into the air, holding the things right in front of their faces as they disgorged fireballs with satisfying thuds. The strings of fireworks kept blowing themselves out, so as I backed slowly toward the Oil Tiger I was treated to the sight of excited Chinese software engineers lunging into the firestorm holding their cigarettes out like fencing foils, trying to reboot the strings without sacrificing eyes, fingers, or eardrums.
BACK IN SHENZHEN, WHEN I’D HAD ABOUT ALL I COULD TAKE OF THE SPECIAL Economic Zone, I walked over a bridge across the Shen Zhen and found myself back in the British Empire again, filling out forms in a clean well-lit room with the Union Jack flying overhead. A twenty-minute trip in one of Hong Kong’s quiet, fast commuter trains took me through the New Territories, mostly open green land with the occasional grove of palm trees or burst of high-rise development, and into Kowloon, where I hopped into a taxi.

Further waves of privatization/conversion of the SOEs occurred in the late 1990s so that, by 2002, SOEs accounted for only 14 per cent of total manufacturing employment relative to the 40 per cent share they had held in 1990. The most recent step has been to open both the TVEs and the SOEs to full foreign ownership.13
Foreign direct investment, for its part, met with very mixed results in the 1980s. It was initially channelled into four special economic zones in southern coastal regions. These zones ‘had the initial objective of producing goods for export to earn foreign exchange. They also acted as social and economic laboratories where foreign technologies and managerial skills could be observed. They offered a range of inducements to foreign investors, including tax holidays, early remittances of profits and better infrastructure facilities.’14 But initial attempts by foreign firms to colonize the internal China market in areas such as automobiles and manufactured goods did not do well.

…

General Motors, which had lost on its failed venture in the early 1990s, re-entered the market at the end of the decade and by 2003 was reporting far higher profits on its Chinese venture than on its domestic US operations.28
It seemed as if an export-led development strategy had succeeded brilliantly. But none of this had been planned in 1978. Deng had signalled a departure from Mao’s policies of internal self-reliance, but the first openings towards the outside were tentative and confined to special economic zones in Guangdong. It was not until 1987 that the party, noting the success of the Guangdong experiment, accepted that growth should be export-led. And it was only after Deng’s ‘southern tour’ in 1992 that the full force of the central government was put behind the opening to foreign trade and foreign direct investment.29 In 1994, for example, the dual currency exchange rate (official and market) was abolished by a 50 per cent devaluation of the official rate.

The popularity of its IPO was partly spurred by the prospect of tapping into the Chinese consumer market with a population of 1.4 billion people. Alibaba, which controls a near monopoly at 80% of China’s online shopping market, had an estimated market capitalisation value of $215 billion. In that sense it is the fourth biggest tech firm in the world, behind only Apple, Google and Microsoft – such is the scale of the Chinese consumer base.
Yet whilst firms such as Alibaba and Huawei were founded in special economic zones such as Hangzhou and Shenzhen, Z-innoway subsumes a startup culture on a smaller scale that is more reminiscent of Silicon Roundabout in London and Silicon Valley. A key characteristic of the district is ‘startup cafes’ such as Garage Café and 3W Coffee, which host startups meetings and ‘accelerator’ programs in a setting not unlike the coffee shops in downtown Palo Alto. Furthermore, the Chinese government is setting up a service centre that will reduce the time taken for a technology startup company to receive the necessary licenses and approvals, to four days from fifteen.27
The outlook for technical development in China has to be promising – though subject to any risks of social upheaval.

A year later, China still accounted for just 0.6 percent of world trade.36 In 2010, it surpassed Japan to become the world’s second largest economy, and Western bankers and economists are now taking bets on just how soon China will claim the title of the world’s largest trading nation.37
Beginning in the late 1970s, Mao’s successor as paramount leader, Deng Xiaoping, began the reform process by establishing four “special economic zones,” coastal enclaves that served as capitalist laboratories where foreign companies were invited to invest on favorable terms. Spurred by early success, Deng gradually expanded the experiment. In 1984, fourteen coastal cities were opened to a surge of foreign investment. In the countryside, agricultural production soared as new rules gave farmers new freedoms and new incentives to produce.

With its network of thousands of reporters worldwide pumping data into proprietary terminals, Bloomberg is not only a media company that operationally dwarfs The New York Times and Financial Times put together, it is also effectively the world’s largest private intelligence service with super-filters that allow clients to cull from thousands of sources. All over the world, private equity funds are taking stakes in farmland, gold, and other resources in exchange for building basic services and serving as friendly intermediaries with Western governments. The writ of the state has become at best hybrid sovereignty over supply chains, special economic zones, and reconstruction projects. Governments can attempt to monitor or regulate corporations, but they cannot control them.
At the same time, “corporate citizenship,” once an oxymoron, is now a cliché. Today the willingness to build an airport or develop a medicine comes as much or more from companies who view these as necessary for their markets and consumers as from governments. One of the world’s largest banks, HSBC—known for its multicultural “visual values” ads in airport Jetway ramps—has twenty thousand offices in eighty-three countries, three hundred thousand employees, and 150 million customers.

…

The sensational allure of Gulf sheikhdoms, built on the back of third world Asian labor, has also perversely made their medieval stratification and hierarchy among citizens and foreigners acceptable to the world. Whether Riyadh, Doha, Abu Dhabi, Manama, Dubai—or any combination of them—becomes the economic engine of the Arab world, their success has inspired imitators to recognize the virtues of free trade, foreign investment, and lean bureaucracy. Special economic zones are popping up from North Africa to Southeast Asia, promoting their ironclad public-private synergy. The rival ports of Chabahar in Iran and Gwadar in Pakistan jockey to be called the “gateway to central Asia,” while Tangier and Tunis contend to be North Africa’s primary port of passage to Europe. Countries that want to catch up might have to set aside new physical spaces for high-productivity “charter cities” to be built from scratch, combining foreign capital and domestic labor.

Mao Zedong suspected this backward province of harboring all manner of class traitors and counterrevolutionaries, and so for two decades he neglected the region as a punishment for suspected thought crimes and recidivist bourgeois habits. Perhaps it was to compensate for Mao’s vindictive behavior that China’s great reformer, Deng Xiaoping, chose the city of Xiamen in southern Fujian as one of the first special economic zones (SEZs) in the early 1980s to inspire local entrepreneurs in thawing out the economy that had been frozen solid by the Maoist ice age. Agog at the success of the Xiamen experiment, it wasn’t long before Fuzhou’s local bosses opened up the provincial capital as well. Deng did not confer the honor on Fujian by chance—80 percent of Taiwan’s people trace their roots back to Fujian. By opening up this province, Deng hoped to attract huge investment from Taiwan to the mainland.

…

“It doesn’t matter whether the mice are black or white,” as Deng’s saying has now been paraphrased, “as long as they avoid the cat.” The provinces may be as corrupt as they wish in making their money, as long as Beijing doesn’t catch them red-handed.
Once Deng Xiaoping had given his blessing to economic experiment, a truly wild version of capitalism quickly swept away decades of stagnant socialist planning in the SEZs (special economic zones), especially in the south of the country. Entrepreneurs could manufacture and sell anything they wished if there was a market. All they needed was to find their baohu san, or “protective umbrella,” the spokes of which were local Party bureaucrats able to reduce business risks by signing licenses or stifling the curiosity of regulatory bodies. The cost of the umbrella was high but could be paid in a variety of currencies.

…

Twenty years ago, Shenzhen had a population of several thousand and was no more than a few scattered villages. From the gentle agricultural pastures of northern Hong Kong, you can now cross into a 12 million–strong giant of hypermalls, factories, tower blocks, and work, work, work. Shenzhen on the Pearl River Delta is the gateway to the new China, having formed a profoundly dynamic symbiotic relationship with Hong Kong. One of the original special economic zones, not only has Shenzhen become the blazing vanguard of China’s future, but it has even rescued the former British colony from decline by throwing it a lifeline of economic opportunity. If there is a market niche, the entrepreneurs of Shenzhen will sniff it out and fill it. Mo Bangfu, a Chinese journalist who has traveled to Chinatowns throughout the world, explained how it works. “I went to Dubai recently,” he said.

If it were not for a widening of their boundaries in 2011, these two cities’ populations would still fall well short of the one million mark.
Of course, one reason for China’s lead is that its economy has grown much faster than India’s, and industrialization encourages urbanization. But even with that caveat in mind, India has also done less to develop second cities. China created dynamic special economic zones to encourage growth in southeastern coastal provinces, led by Guangdong and Fujian, where many of the fastest-growing cities emerged. One of the surprises about China’s top-down approach to development is how much freedom Beijing granted to its lesser cities to take advantage of their location, even to commandeer land or funnel bank loans into building projects. This was authoritarian-style development but with power dispersed to the local level.

…

This area includes a “bungalow zone” of hundreds of homes on more than twenty-five square kilometers owned almost entirely by the government and surrounded by verdant parklands and laced with wide tree-lined roads. Top officials jockey with one another for residences in this urban oasis, some of which are valued at upward of $50 million. In the emerging world, the only comparable government enclaves I know of are also in India, in the hearts of second-tier cities like Patna and Bareilly.
India tried to create special economic zones on the China model, but these zones have restrictive rules on the use of land and labor, so they have done little to create jobs or build urban populations. India’s outdated building codes discourage development in downtown areas and drive up prices, which is one reason average urban land prices are now twice as high in India as in China, according to the Global Property Guide. Though the once all-powerful government in Delhi has in recent decades ceded significant spending authority to chief ministers in India’s twenty-nine states, that power has not filtered down to the mayoral level, and it shows.

…

To help its global companies compete abroad, the Abe government cut corporate taxes from 40 percent to 32 percent and is targeting a further cut to 29 percent, a little lower than in Germany. To fortify a rapidly aging workforce, Abe has pushed “womenomics,” including a revamping of childcare systems. The share of adult women who participate in the work force is up from 60 percent in 2010 to 65 percent today—surpassing the United States, where the share is stagnant at 63 percent. In addition, the Abe government is talking about creating special economic zones with looser rules for foreign workers, particularly for those involved in care for the elderly. This test run may uncover how far Japan would be willing to open its doors to economic migrants.
The Abe government is also a joint author with the United States of the Trans-Pacific Partnership, which is at its core a Japanese-American plan to write the rules of fair trade before China can.

“Now that the West’s energy security depends on our strategic position, it will have to help us get control of the country,” a Georgian government adviser declared in an office refurbished with EU funds. To remove the shattered debris of Sovietism and build a new Georgia from scratch will continue to cost billions, but now Europe has no choice. The BTC pipeline makes Georgia’s economy an appendage of Azerbaijan’s, allowing it to benefit from the spillover effects in the transport, communications, hotel, and catering industries (much like in third-world special economic zones). Georgian banks now operate courtesy of the International Finance Corporation (IFC), while the United States and the World Bank spend close to $100 million annually to buy electricity seasonally from Russia and build roads and gas refineries.
It is common to refer to the long-standing conflicts resulting from Soviet-imposed demographic schizophrenia as “frozen,” a very inconvenient fiction that encourages diplomatic apathy.

…

Its economy is already larger than the rest of Central Asia’s states combined, and the value of its energy assets is estimated at $9 trillion. Despite horrendous levels of corruption, diversification is under way even as oil output and profits boom, insulating the economy from future volatility in the global energy market.8 Matching the ambition of the semi-authoritarian Asian tigers, Kazakhstan has established special economic zones and information-technology parks and has turned biological-weapons plants into food-processing factories. It also plans to utilize its enormous uranium reserves for nuclear energy. New regional airports and wide roads are restoring connections across the continental steppe. Ski resorts are also emerging in the Tien Shan range—to which Europeans may soon flock, if global warming diminishes snowfall in the Alps.

…

For the Chinese, a garden is a commercial plot, while for Malays it is part of the home and the earth.7 Today some joke that “if the Chinese became Muslim, the Malay would convert to Buddhism.”
Nonetheless, as a former official whispered in his humble home office, “We won’t admit it, but without the Chinese we might still be an economic backwater.” Despite Mahathir’s tough pro-Malay stance, his closest business associates are Chinese. He even created a special economic zone off the coast of Borneo to lure Chinese investment, cleverly attracting their funds while limiting their control. China’s growing ties with Malaysia test the proverb that “a close neighbor is more important than a distant relative.” Over the centuries, Chinese migrants have clustered around Kuala Lumpur and Penang, the former still very much a Chinese city with Chinese architecture and a lively annual Chinese parade.

But behind every handset is another story: that of the labor arrangements, supply chains and flows of capital that we implicate ourselves in from the moment we purchase one, even before switching it on for the first time.
Whether it was designed in studios in Cupertino, Seoul or somewhere else, it is highly probable that the smartphone in your hand was assembled and prepared for shipment and sale at facilities within a few dozen kilometers of Shenzhen City, in the gritty conurbation that has sprawled across the Pearl River Delta since the Chinese government opened the Shenzhen Special Economic Zone for business in August 1980.4 These factories operate under circumstances that are troubling at best. Hours are long; the work is numbingly repetitive, produces injuries at surreal rates,5 and often involves exposure to toxic chemicals.6 Wages are low and suicide rates among the workforce are distressingly high.7 The low cost of Chinese labor, coupled to workers’ relative lack of ability to contest these conditions, is critical to the industry’s ability to assemble the components called for in each model’s bill of materials, apply a healthy markup8 and still bring it to market at an acceptable price point.

…

., Proceedings of Ubicomp 2005, Berlin: Springer Verlag, 2005.
3.While there had been some early thought that such interface gestures might be branded—that is, defined rigorously as sets of numeric parameters, then claimed as the intellectual property of a particular enterprise, such that no competitor could offer them as a means of interaction without first licensing them from the rights-holder—that ambition, thankfully, turned out to be legally untenable. As a result, these gestures now constitute a universal, industry-wide language of touch. John Ribeiro, “US patent office rejects claims of Apple ‘pinch to zoom’ patent,” PCWorld, July 29, 2013.
4.Ann Fenwick, “Evaluating China’s Special Economic Zones,” Berkeley Journal of International Law Volume 2, Issue 2, Fall 1984.
5.“According to a report by the Shanghai Academy of Social Sciences, each year about forty thousand fingers are either cut off or crushed in factories in the Pearl River Delta alone, mostly during assembly line operations for the export business”: Jack Linchuan Qiu, Working-Class Network Society, Cambridge, MA: MIT Press, 2009, p. 104.
6.Michael Blanding and Heather White, “How China Is Screwing Over Its Poisoned Factory Workers,” Wired, April 6, 2015.
7.Jenny Chan, “A Suicide Survivor: The Life of a Chinese Migrant Worker at Foxconn,” Truthout, August 25, 2013.

Abandoned by many of their shadowy clients, ambitious companies like Casey’s are learning to innovate instead.
Both stories begin in Shenzhen. Liam Casey arrived in 1996, a few years after paramount leader Deng Xiaoping declared “to get rich is glorious” while passing through the city on his farewell tour. Deng is the father of Shenzhen, having chosen this sleepy fishing village as the first of China’s “special economic zones” in 1980. Foreign firms were invited to open shop here with few constraints or taxes, triggering the transformation of the Pearl River Delta into “the factory of the world” and Shenzhen into the “Overnight City,” having grown two-hundred-fold since then. While Shanghai’s Blade Runner landscape symbolizes China’s future, Shenzhen is the template for its instant cities.
Until the crisis, the Delta was the world’s biggest boomtown, crowding 5 percent of China’s population into less than 1 percent of its land, where they produced 20 percent of the country’s GDP and 40 percent of its exports.

…

Hong Kong’s historical advantage as a free port has always been its infrastructure—its harbor and its airport—an advantage the central government is now trying desperately to erase.
The endgame, as far as anyone can tell, is to supplant Hong Kong. The roles have been cast. Shanghai will replace it as China’s financial hub (a plan ratified in 2010), while “Guangzhou will be developed into the ‘Best District’” as “an international metropolis that embraces the world and serves the whole country. Shenzhen will continue to play its role as the window of the special economic zones” and fulfill its destiny as “a city exemplifying socialism with Chinese characteristics.” But the Overnight City and Hong Kong had other ideas.
The morning I arrived in Kowloon, its citizens were shocked to learn that their government was plotting an outright merger with Shenzhen. A think tank backed by the city’s chief executive had concluded Hong Kong was barely punching above its weight.

…

More than slot machines, the casinos aspire to export a distinctly American brand of hedonism— chaste but chasing a glint of danger, fueled by equal parts shopping, eating, relaxing, and gambling, in that order.
(Ironically, Adelson’s desperate lieutenants in Vegas have taken to importing Chinese high rollers—the last whales still gambling—aboard private jumbo jets outfitted with baccarat tables to while away the fourteen-hour flights. Winnings above international waters are tax free.)
Bordering Macau to the north is Zhuhai, the younger brother of Shenzhen. Founded around another special economic zone, the city never really took off by China’s standards, topping out at about the size of Philadelphia. But it was blessed with an airport that was a tabula rasa, gleaming and empty. Victor Sit brought it to John Kasarda’s attention more than a decade ago, inspiring him to recycle the blueprints of the Global TransPark. As a man in good standing with Beijing, Sit pressed their plan on party leaders, who nodded their approval and then were never heard from again.

Mao’s designated successor, Hua Guofeng, carried forward Zhou’s vision and made a definitive break with the Maoist past at a National Party Congress in December 1978. Hua was aided in this by the recently rehabilitated and soon to be dominant Deng Xiaoping. Real change began the next year, followed by a period of experimentation and pilot programs aimed at increasing autonomy in decision making on farms and in factories. In 1979, China took the landmark decision to create four special economic zones offering favorable work rules, reduced regulation and tax benefits designed to attract foreign investment, especially in manufacturing, assembly and textile industries. They were the precursors of a much larger program of economic development zones launched in 1984 involving most of the large coastal cities in eastern China. Although China grew rapidly in percentage terms in the mid-1980s, it was working from a low base and neither its currency nor its bilateral trade relations with major countries such as the United States and Germany gave much cause for concern.

…

With memories of Tiananmen fresh in their minds and the historical memory of over a century of chaos, the leadership knew the survival of the Communist Party and the continuation of political stability depended on job creation; everything else in Chinese policy would be subordinate to that goal. The surest way to rapid, massive job creation was to become an export powerhouse. The currency peg was the means to this end. For the Communist Party of China, the dollar-yuan peg was an economic bulwark against another Tiananmen Square.
By 1992, reactionary elements in China opposed to reform again began to push for a dismantling of Deng’s special economic zones and other programs. In response, a visibly ailing and officially retired Deng Xiaoping made his famous New Year’s Southern Tour, a personal visit to major industrial cities, including Shanghai, which generated support for continued economic development and which politically disarmed the reactionaries. The 1992 Southern Tour marked a second-stage takeoff in Chinese economic growth, with real GDP more than doubling from 1992 to 2000.

PART FOUR
The Future Economy
Eleven
DALIAN, CHINA
Port of Call
A Japanese mogul plots to take the
world’s last sushi frontier
Takamasa Ueno, a young sushi chef from northern
Japan, made his first trip to China in 1986, when a
friend from his hometown of Sendai opened a
yakiniku restaurant in Dalian, a highly trafficked port
city on the Yellow Sea. When Deng Xiaoping in 1984
designated “coastal open cities,” Dalian—which had
served as the commercial and navigational gateway
to northeast China under the alternating control of
Russia, Japan, and the Soviet Union—was a natural
candidate to participate in this effort at economic
reform. Five years earlier, Deng had named four
“special economic zones” as laboratories for
capitalist industry, and then expanded the experiment
to fourteen further cities. Chinese cities at the time
were not exactly laboratories in the development of
consumer tastes—streets were home to a sea of men
in the same Communist blue suit—but with the
“Coastal Open City” designation came liberalization
of restrictions on foreign trade and, apparently, an
appetite for Japanese-style barbecue.

They dropped pieces of wood in the water directly in front of Impeccable’s path. The incident took place in international waters in the South China Sea, about 75 miles south of Hainan Island. It was preceded by days of increasingly aggressive conduct by Chinese vessels.10
Chinese Foreign Ministry spokesman Ma Zhaoxu (10 March 2009):
China has lodged a solemn representation to the United States as the USNS Impeccable conducted activities in China’s special economic zone in the South China Sea without China’s permission. We demand that the United States put an immediate stop to related activities and take effective measures to prevent similar acts from happening. The U.S. claims are gravely in contravention of the facts and confuse black and white and they are totally unacceptable to China.11
The United States and China each continues to maintain it was in the right in the USNS Impeccable incident.

…

Even in this difficult environment, Japan remained the world’s second-largest economy until 2010; its domestic demand, its science and technology, its proven manufacturing expertise—including its ability to establish world-class plants offshore—its trading networks and its intellectual and financial capital ensured its continued importance in global business circles. Meanwhile, China’s paramount leader Deng Xiaoping (who died in 1997) had reinvigorated the reform process at the beginning of the 1990s, and his new team led by President Jiang Zemin, joined later by Premier Zhu Rongji, was presiding over a long period of 8 percent or better growth that catapulted China’s economy into the major league. The special economic zones that began in the early 1980s with the sleepy fishing village of Shenzhen, just across from Hong Kong on the Chinese mainland, were beginning to deliver on their trade and investment potential. In 2000, the city of Shenzhen—by then its population swollen past 10 million people—marked Deng’s role as a “great planner and contributor” to its development, unveiling a 6 m bronze statue in Lianhua (Lotus) Mountain park that shows Deng in a purposeful pose.

The Chinese leadership resisted the conventional advice in opening their economy because removing barriers to trade would have forced many state enterprises to close without doing much to stimulate new investments in industrial activities. Employment and economic growth would have suffered, threatening social stability. The Chinese decided to experiment with alternative mechanisms that would not create too much pressure on existing industrial structures. In particular, they relied on Special Economic Zones (SEZs) to generate exports and attract foreign investment. Enterprises in these zones operated under different rules than those that applied in the rest of the country; they had access to better infrastructure and could import inputs duty-free. The SEZs generated incentives for export-oriented investments without pulling the rug from under state enterprises.
What fueled China’s growth, along with these institutional innovations, was a dramatic productive transformation.

…

It makes dollars plentiful and their price low, reducing the competitiveness of domestic industries on global markets.31 In a second-best world, increasing transaction costs on international finance may make sense.
There are diverse ways in which a particular constraint can be lifted, some more attuned to domestic circumstances than others. If you want to increase the economy’s outward orientation, this can be achieved via export subsidies (as in South Korea and Taiwan), via an export-processing zone (as in Mauritius), via Special Economic Zones (as in China)—or via free trade (as in Hong Kong) for that matter. Domestic industries can be promoted through subsidized credit (South Korea), tax incentives (Taiwan), or trade protection (Brazil, Mexico, and Turkey). Property rights can be enhanced by importing and adapting foreign legal codes (as in Japan during the Meiji Restoration) or by developing domestic variants (as in China and Vietnam).

Those questions were to be taken up at further international meetings later that year in Beijing and Vladivostok. But North Korean officials were skeptical already about the part of the proposal that called for multinational management of the zone—-which would mean sharing power in their own territory.
Thus Pyongyang was proceeding with a parallel go-it-alone approach. On paper, North Korea had already established its first special economic zone at Rajin and Sonbong, inside the territory that would be part of a Tumen Delta multinational zone if the Chinese and others should have their way. Trying to lure investors there—regardless of how the multinational negotiations might turn out—clearly was a big part of what the government had in mind when it admitted our group of visitors. Rajin and Sonbong port officials planned to expand cargo capacity from six million to 50 million tons a year in two stages—and also planned to build a brand new port in the area with annual capacity of another 50 million tons.

…

True, Kim Dal-hyon’s acknowledgment of serious economic difficulties had not yet become the party line; subordinates such as Kim Song-sik continued to assert that all was well and the country was experiencing little ill effect from the changes in other communist nations. And even Kim Dal-hyon insisted that his countrymen “do not have any worries about food, clothing and housing.” Significantly, though, he acknowledged bluntly that “the world is changing” and that creation of special economic zones “is for our survival,” in a world where “there are only a few countries following the socialist model.”
Another small example of the new, more enlightened approach: North Korean officials seemed to have realized that outsiders had little stomach for hearing-worshipful encomia to the wondrous leadership of President Kim Il-sung and his son Kim Jong-il. During our 1992 visit, unless they-were asked specifically, they mercifully refrained from spouting the interminable old lines about how the Great or Dear Leader provided this or that factory of school out of love for the people, blah blah blah.

…

But on September 5, 1998, the Supreme People’s Assembly adopted a new constitution for the Democratic People’s Republic of Korea. Its third chapter covered the economy. Article 33, radical by past standards, read: “The State shall introduce a cost accounting system in the economic management … and utilize such economic levers as prime costs, prices and profits.” Article 37 added that the state should encourage “joint venture enterprises with corporations or individuals of foreign countries within a special economic zone.”5 The following year the country enacted an elaborate External Economic Arbitration Law.
For a time after that, change once more slowed. Pyongyang-watchers warned that signs of relaxation in the North must be read carefully. Jean-Jacques Grauhar, secretary general of the Seoul-based European Union Chamber of Commerce, previously had worked and lived in Pyongyang for several years. He told me in 2000 that North Korean leaders apparently had no objective beyond repairs to their economic system.

China, instead of replacing Hong
Kong's culture and economy with its Communist imprint, has found itself
increasingly influenced by the culture and economic rules of Hong Kong.
The 1.4 percent annual average net shift of rural to urban population over
the last decade has measurably increased China's productivity: the capital
stock in urban areas is significantly more sophisticated than that in rural
China. That spread has created an urban output per hour more than three
times that of rural China. Special Economic Zones (SEZs) inaugurated in
1980, which focused on manufacturing exports in facilities financed by
foreign capital, have proved highly successful. Privatization of some stateowned enterprises (SOEs) has made significant progress, and other SOEs
are undergoing major restructuring. As a consequence, employment in these
organizations has fallen sharply, an indication that creative destruction is
moving at a reasonably good clip.
304
More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks
This file was collected by ccebook.cn form the internet, the author keeps the copyright.

…

China's export-led explosion in economic growth has clearly followed the
earlier path of these Tigers—particularly Hong Kong, Taiwan, Korea, and
Singapore. Their model is simple and effective. The developing nation
opens up part or all of its economy to foreign investment to employ a lowwage, but often educated, workforce. Sometimes it is politically easier to
set up designated geographic areas such as China's Special Economic Zones
to welcome foreign investment and its technology. Critical to this model is
that investors receive assurances that, if successful, they will be able to reap
the rewards. This requires that property rights be respected by the developing country.
Given the devastation of Asia in World War II and the wars in Korea
and Vietnam, economic advance started from a very low base. Per capita
GDP of much of East Asia was not far above levels of subsistence.

But during the Cultural Revolution, his wife, the director of a kindergarten, was labeled a “capitalist roader” because her father had been a general in the Nationalist Army; Red Guards shaved half of her head. Wu himself was tagged an “antirevolutionary” and sent off to “reform through labor.” “I experienced a drastic change in ideology,” he told me. By the eighties, Wu was a leading expert on the free market, even though that term was too controversial to utter. Wu had to call it “the commodity economy.”
Beginning in 1980, China designated special economic zones, which used tax advantages to attract foreign investment, technology, and links to customers abroad. The zones needed workers. Since the fifties, the Party had controlled where people lived by dividing households into two types: rural and urban. The distinction ordained where you were born, schooled, employed, and, most likely, buried. With few exceptions, only the Public Security Bureau could change your household registration, or hukou.

We wired them the money, and it was probably—
gosh, it was probably $25,000 or something exorbitant to their bank account.
And then we had to send them the chips for the Pis. But you can’t send chips
to mainland China because there’s an import duty, so the way you get chips
into China is to use a shipment point in Hong Kong. You take them across the
border from Hong Kong into Shenzhen. That’s a special transaction, because
Shenzhen is still a special economic zone. And so we had to send these chips,
159
160
Chapter 12 | Eben Upton: Founder, Raspberry Pi Foundation
$25,000 worth of chips, to these guys at their trans-shipment point. And their
trans-shipment point was an apartment. It was an apartment building. We sent
$25,000 worth of chips to these guys at their apartment. I was kind of like,
“Ehhh, $25,000 just blown away,” you know?
And then there were delays, which made us worried that things had gone
wrong.

…

I’ve been in cities with big electronics
markets like Tokyo and Seoul, and the difference between what I see here and
anywhere else is that this place is built to do business. This place is built to
get things done.
Thirty years ago, there was no Shenzhen. It was a little fishing village just across
the border from Hong Kong. Now it’s a city of ten to twenty million people,
depending on how you count it. And this has all grown up around the Special
Economic Zone that China designated for manufacturing. It’s a very, very special place. There’s nowhere else in China like this. It’s built to do business.
Osborn: So Shenzhen became the city that it is by design?
Lesnet: Yes, that was by design. It really is. It’s such a special place. It has a vibe
unlike anywhere else in China. It’s not just, “Get the business done.” Everyone
here is so young. It’s like London during the industrial revolution or New York
in the 1800s.

China, Canada, and much of the rest of the world are in the grip of market fundamentalism—the promotion of economic growth, and the relentless pursuit of profits. This has led corporations to secure ideal investment climates by any means necessary. When the Free Trade Area of the Americas was defeated, national governments pursued bilateral trade agreements on behalf of their corporate sponsors. And when bilateral agreements were not enough, Special Economic Zones (SEZs) have been established, where corporations write their own labour laws, environmental regulations, and taxation regimes.
The proliferation of SEZs and more conventional corporate land grabs in China has resulted in popular uprisings. In 2010, there were an estimated 180,000 mass incidents—that is, protests, riots, and group petitioning.9 In 2011, farmers in Guangdong province protested for months due to land disputes and government land confiscations.

Lily and I were glued to the windows, watching the city’s cloud-kissing skyscrapers put on a spectacular Vegas-style light show. One building was laced with neon blue zigzags that danced in the rainy reflection on the car windows. Shenzhen dazzled us completely.
The city is the stuff of legend. Thirty years ago it was a little dot of a place, a fishing village of thirty thousand people.24 It was China’s first special economic zone, set up in 1980 to gift foreign investors with low tax rates and exemptions on import duties for parts and materials used in export processing. From there it grew faster than anything the world had ever seen. The economy expanded on average 28 percent per year between 1980 and 2008.25 Factories went up overnight. Cheap Chinese clothes, electronics, toys, and everything else imaginable started to flow into the United States out of Shenzhen.

As we saw in the case of the farmers in Xiaogang, they often did so without official recognition, but it inspired the leadership to think differently.
In its efforts to raise the country out of its abysmal poverty, the Chinese communist party learned from the Asian ‘tiger’ economies of South Korea, Taiwan, Hong Kong and Singapore, but also from local experiments with private farming and township enterprises. So it allowed special economic zones in Guangdong from 1980, which were exempt from the rules of the command economy. Production was mostly based on market forces, international investments and technologies were welcome, and they could engage in international trade. Business there combined investments from Hong Kong and Taiwan, received workers from northern provinces and sold to Western markets.
Although better wages inspired workers to move to the new industrial towns, this created new problems.

As agriculture became more productive, rural workers were able to move into other areas, starting with food processing and distribution, and gradually expanding into other industries and services. By the mid-1990s, rural “town and village enterprises,” almost none of which existed in 1978, accounted for 25 percent of the Chinese economy. These firms began to put pressure on state-run companies in the cities, which were less competitive. This in turn prompted broader economic reforms, the establishment of special economic zones for industrial activity, efforts to attract foreign investment, and so on—all of which fueled further economic growth. The result was an astonishing reduction in poverty, from 33 percent of the population in 1978 to 3 percent in 2001.
India was slower to introduce the policy reforms needed to allow improvements in agricultural productivity to translate into broader economic growth. Instead, India’s main concern was agricultural self-sufficiency, and to this end the agricultural sector was tightly regulated and controlled by the government, with price controls, restrictions on the movement of agricultural goods within the country, and barriers that served to discourage foreign trade.

In 1998, to retake control, Moscow declared a state of emergency.3
At the very end of the century, concerted efforts were made to rescue the failed city by the rehabilitation both of its physical infrastructure and its social fabric. Modern buildings were constructed, eyesores were cleared, roads mended and trees planted. Drug gangs were rounded up, protection rings closed down, and foreign smuggling stifled. The aim was to turn Kaliningrad into the hub of a Special Economic Zone, a ‘Baltic Hong Kong’ attracting new enterprises, casinos and tourist hotels. The European Union, eager to contain the danger on its borders, offered far-reaching advice and co-operation.4
In the course of Vladimir Putin’s two presidential terms, from 2000 to 2008, Russia, though patently only pseudo-democratic, made considerable progress towards greater stability and prosperity, and Kaliningrad’s downward slide was halted.

…

And though the Kaliningrad oblast regenerates, the adjacent districts in Poland and Lithuania, now inside the European Union, regenerate much faster.8
Two factors inhibit Kaliningrad’s would-be renaissance. One derives from the nature of the Putin regime itself. If crime, corruption and a hidden local hierarchy lie at the heart of the problem, the centralized authoritarian system is unlikely to cure it; the Special Economic Zone may well prove to be more of a money-spinning outpost of Kremlin Corp than a motor of local well-being. One of the most successful, government-backed enterprises, the Baltic Tobacco Factory (BTF), turns out to be specially designed for smuggling cigarettes into Germany. It mass-produces the ex-Chinese Jin Ling brand in packets that are suspiciously similar to those of Camel cigarettes, except that a goat has replaced the camel.9
Further inhibitions stem from the pathological proportions of the Russian military presence.

In addition it had been isolated, a condition partly self-imposed and partly a result of an American embargo (involving a total ban on all transactions with China until 1971), plus the withdrawal of all Soviet aid and personnel in 1959. The challenges facing the new Chinese leadership, therefore, were far more formidable than those that had confronted Taiwan or South Korea, especially as these had enjoyed considerable American patronage and munificence during the Cold War.
The process of reform began in 1978 with the creation of a handful of special economic zones along the south-eastern seaboard, including Guangdong province, in which the rural communes were dismantled and the peasants were given control of the land on long-term leases and encouraged to market their own produce. It was based on a step-by-step, piecemeal and experimental approach. If a reform worked it was extended to new areas; if it failed then it was abandoned. Such down-to-earth pragmatism stood in sharp contrast to the grand ideological flourishes that informed the Cultural Revolution era and the Maoist period more generally.

Robert Hart, nineteenth-century British trade commissioner for China, once wrote: “[The] Chinese have the best food in the world, rice; the best drink, tea; and the best clothing; cotton, silk, fur. Possessing these staples and their innumerable native adjuncts, they do not need to buy a penny’s worth elsewhere.”12 China now engaged with the global economy, reversing the traditional policy of economic self-reliance.
Modeled on the post-war recovery of Japan, China used trade to accelerate the growth and modernization of its economy. Special economic zones (SEZ), for example in Shenzen, located strategically close to Hong Kong, were established to encourage investment and industry, taking advantage of China’s large, cheap labor force. Benefiting from rising costs in neighboring Asian countries, China attracted significant foreign investment, technology, management, and trading skills, from countries keen to outsource manufacturing to lower cost locations.

Postindependence, land politics became even more complicated, especially the failed land reform and redistribution efforts of the 1950s and 1960s. Today the politics of land in India still has a deeply adversarial texture—it is seen primarily as a battle between the powerful and the powerless. In the 1960s and 1970s, it was the zamindars on top, but lately it is companies eager to establish special economic zones (SEZs) in partnership with state governments that are seen as new, autocratic overlords. Singur and Nandigram’s highly public battles over land reallocation for businesses are only the most visible signs of the continuing ugliness in our land politics.
These disputes stem from the convoluted Indian laws around property. Land laws in India are a bureaucratic sinkhole—registering the sale deed of a property in India, for example, certifies only the transfer of land, and not a change in ownership.

For decades it was a sleepy rural outpost, a green suburb in the New Territories of the former British protectorate of Hong Kong, the site of the last station on the old Kowloon-Canton Railway (today known as the MTR East Rail Line, a branch of Hong Kong’s subway) before you entered the People’s Republic of China. Shenzhen, across the river, was a placid, picturesque fishing village. Between 1949 and 1979, the only legal way to cross this border was to hike over the small bridge at Lo Wu.
Then, in the 1980s, China designated Shenzhen a Special Economic Zone, and Guangdong province, in which the city is located, became a haven for factories. By June 30, 1997, when the British handed Hong Kong back to China, Shenzhen was poised to challenge the capitalist city to the south. Today, Shenzhen is almost double the size of Hong Kong (thirteen million versus seven million.) Most of its residents are migrants from the north, and this has led to another massive change.

If my town were world famous as a warren of poisonous bottom-feeding, I’d probably be pissed off, too, when people wandered into my workshop with cameras. Whatever the source of the bad vibes, Guiyu sounded unfriendly. I had heard stories of journalists being screamed at, chased, pelted with bricks.
Guiyu isn’t the only weirdly specialized place in Guangdong Province. Only two hundred miles down the coast is the “special economic zone” that is the city of Shenzhen, one of the most concentrated areas of electronics manufacturing in the world. (It was to companies in Shenzhen, Mr. Han said, that he sold his recycled components.) Shenzhen is home, for instance, to the famous “Foxconn City,” the giant complex where iPhones and a million other things are built.
From waste recycling to questionable industrial processes to simple carbon emissions, Guangdong is a land to which we outsource not only our manufacturing but also our pollution.

There is plenty of evidence that charter cities could work in today’s world. There’s Singapore, long a successful independent city state off the coast of Malaysia; Hong Kong, for many years a British enclave on the South China Sea; more recently, Shenzhen, thirty years ago a fishing village not far from Hong Kong, now a city to rival Hong Kong itself after being designated China’s first ‘special economic zone’. Beyond South-East Asia, Dubai has proved – property bubble notwithstanding – that one can build a successful city anywhere. What all four cities have in common with Lübeck, along with their coastal settings, is that they have been governed by different rules from surrounding areas.
So we know that independent city states can survive and prosper in a globalised economy. We know it is physically possible to put together impressive infrastructure in a short space of time.

Nevertheless, neither the nature of China’s rise nor its future impact can be understood without a good grasp of the world as shaped by the Global Minotaur. For, come to think of it, the soaring dragon not only grew up in an environment shaped by the Global Minotaur, but must also mature in an unstable world occasioned by the latter’s demise.
Deng Xiao Ping’s new course for China was modelled on Japan and the South East Asian tigers. The guiding principle behind the Chinese plan for growth was that of a dual economy, in which special economic zones would dot China with small Singapores or Hong Kongs – islands of intense capitalist activity in a sea of unlimited labour power. Meanwhile, the centre would direct investment (very much along the lines of the Japanese model), but would also negotiate technology transfers and foreign direct investment directly with Western and Japanese multinational corporations. As for China’s global positioning, it would resemble that of South East Asia, in seeking sources of demand for its export-led growth from the United States and Europe.

CHAPTER TWELVE
The Axis of Equality
A woman has so many parts to her body, life is very hard indeed.
—LU XUN, “ANXIOUS THOUGHTS ON
‘NATURAL BREASTS’” (1927)
We’ve been chronicling the world of impoverished women, but let’s break for a billionaire.
Zhang Yin is a petite, ebullient Chinese woman who started her career as a garment worker, earning $6 a month to help support her seven siblings. Then, in the early 1980s, she moved to the special economic zone of Shenzhen and found a job at a paper trading company partly owned by foreigners. Zhang Yin learned the intricacies of the paper business, and she could have stayed and risen in the firm. But she is a restless, ambitious woman, buzzing with entrepreneurial energy, so she struck out for Hong Kong in 1985 to work for a trading company there. The company went bankrupt within a year. Zhang Yin then started her own company in Hong Kong, buying scrap paper there and shipping it to firms throughout China.

Many Chinese and non-Chinese are withholding their enthusiasm, though, because the Chinese government has proved unwilling to loosen restrictions on foreign news sites and social media like Facebook and Twitter, as was originally rumored and reported with the announcement of the FTZ. The People’s Daily, which the government uses to gets its views to the public, shut down people’s hopes when it reported, “The Shanghai FTZ is a special economic zone but not a special political zone. No one in their rational mind could imagine that the second-largest economy in the world, after over 60 years of striving, would set up a ‘political concession’ when it is thriving day by day.”
The Chinese government’s strategy is to jump-start development in seven key industries: energy saving and environmental protection, new-generation information technology, biotechnology, high-end equipment, new energy, new materials, and new-energy vehicles.

You can flag passing taxis at Tiger Mountain Great Wall (3km away) to ride up to the dock for ¥5. Alternatively, get a Dandong taxi to take you here directly.
VISITING THE HERMIT KINGDOM
Most tours to the Democratic People’s Republic of Korea (DPRK) start with a flight from Beijing into Pyongyang, but Jilin and Liaoning offer a more interesting alternative launching pad. You can visit the Special Economic Zone of Rason from Yanji in Jilin province or consider taking a train from Dandong all the way to Pyongyang. The following tour agencies organise visas and offer trips designed for Westerners. Check the websites for costs and itineraries. Note that some travel restrictions apply to American and Japanese tourists.
Explore North Korea (www.explorenorthkorea.com) Dandong-based agency.
Koryo Tours (www.koryogroup.com) Large, long-running Beijing-based agency.

…

From there, board bus 22 and get off at Xihe bus station (Xihe qichezhan %875 4176; Gongye Donglu). Buses to Wuzhishan (¥20, two hours) depart at 8am, 11.45am and 3.30pm.
Guangzhou’s main train station has trains that stop over at Shaoguan East station (Shaoguan Dongzhan ¥38, 2½ hours). Buses to Wuzhishan leave at 7.45am, 11.15am and 3.15pm.
Shenzhen
%0755 / Pop 10.5 million
One of China’s wealthiest cities and a Special Economic Zone (SEZ), Shenzhen draws a mix of business people, investors and migrant workers to its golden gates. It’s also a useful transport hub to other parts of China.
You can buy a five-day Shenzhen-only visa (¥160 for most nationalities, ¥469 for Brits; cash only) at the Luohu border ( GOOGLE MAP ; Lo Wu; h9am-10.30pm), Huangang (h9am-1pm & 2.30-5pm) and Shekou (h8.45am-12.30pm & 2.30-5.30pm). US citizens must buy a visa in advance in Macau or Hong Kong.

…

More recently, China’s first communist cell was formed here in the 1920s, and the island was heavily bombarded and then occupied by the Japanese during WWII. Li and Han Chinese guerrillas waged an effective campaign to harass the Japanese forces but the retaliation was brutal – the Japanese executed a third of the island’s male population. Even today resentment over Japanese atrocities lingers among the younger generation.
In 1988 Hainan was taken away from Guangdong and established as its own province and Special Economic Zone (SEZ). After years of fits and starts, development is now focused on turning tropical Hainan into an ‘international tourism island’ by 2020. What this really means, besides developing every beach, and building more golf courses and mega-transport projects (such as a high-speed rail service round the island, a cruise ship terminal and even a spaceport), is not entirely clear.
THE LI & MIAO
There are some 39 ethnic groups on Hainan, of which four are the main minorities.

Every experience suggested that given peace and a united government—both largely lacking since the 1840s—China, too, could prosper within the Western-dominated global economy, but Deng went further still, actively pushing China toward integration. To reduce the pressure on resources, he promoted the notorious One Child Policy, which (in theory) required women who had two babies to be sterilized,* and to increase the resources available he embraced the global economy. China joined the World Bank and International Monetary Fund, opened Special Economic Zones to attract capitalists from Macao, Hong Kong, and Taiwan, and even admitted a Coca-Cola plant to Shanghai.
By 1983 Deng had effectively killed Mao’s communes. Peasants were pursuing “sideline” activities for personal gain and businessmen were keeping some of their profits. Farmland still belonged to collectives but families could now lease plots for thirty years and work them privately.

But the provinces whose names are synonymous with the economic rise of China's Pacific Rim are coastal Jiangsu and Zhejiang on either side of Shanghai; Fujian directly opposite Taiwan and for centuries the source of "overseas Chinese" who emigrated to Southeast Asia and whose wealth returned to propel the modern
RED STAR RISING 141
Chinese economy; and Guangdong in the south, where the Pearl River Estuary is evolving into one of the world's greatest urban-industrial complexes incorporating Hong Kong, Shenzhen, Guangdong, Zhuhai, and Macau.
It was Deng Xiaoping's notion to apply his new economic policies in this coastal zone, where market economics and communist politics would coexist without contaminating the rest of the country. Accordingly, the regime introduced a complicated but effective system of so-called Special Economic Zones (SEZs), which in effect were a series of port cities and coastal areas where foreign technologies and investments were welcomed and where investors were offered capitalist-style incentives. Low-wage labor could be hired, taxes were low, leases were simple, and products could be sold on foreign as well as domestic markets. Even Taiwanese enterprises could operate here, though under certain restrictions.

In the pursuit of strict equality everyone was issued with what looked very much like pyjamas. Grey ones. Yet today when you walk down a typical Chinese street what you see is a kaleidoscope of Western styles of clothing. Advertising hoardings in all the major cities extol the virtues of Western brands from Armani to Ermenegildo Zegna. Like every other industrial revolution, China’s began with textile production. Until recently, most of the garments manufactured in the coastal Special Economic Zones were intended for export to the West. Now, with demand down in depressed Western economies, the principal challenge facing policy-makers in Beijing is how to make the Chinese worker save less and consume more; in other words, buy more clothes. It seems as if the triumph of the West’s consumer society is close to being complete. Or is it?
Istanbul is a cosmopolitan city, where the outward trappings of Western civilization have long been commonplace in the streets.

In developed countries and the European Union, service-sector jobs capture a whopping 73% of all employment. In contrast, they capture just 28% in sub-Saharan Africa. P. 330 and Table 11.2, P. Knox et al., The Geography of the World Economy, 5th ed. (London: Hodder Education, 2008), 464 pp.
47 Governments around the world are doing their part to help encourage all this. A new survey of 245 of the world’s fastest-growing cities found them building transportation systems, designating “special economic zones,” and streamlining their banking and financial systems. State of the World’s Cities 2008/2009, United Nations Human Settlements Programme (UN-HABITAT) (UK and USA: Earthscan, 2008).
48 World Urbanization Prospects: The 2007 Revision, United Nations, Department of Economic and Social Affairs, Population Division, 2008.
49 State of the World’s Cities 2008/2009, UN-HABITAT, 2008.
50 Press Conference, United Nations Department of Public Information, News and Media Division, New York, February 26, 2008.
51 UN-HABITAT Press Release, SOWC/08/PR2, 2008.
52 Table I.7, World Urbanization Prospects: The 2007 Revision, United Nations, Department of Economic and Social Affairs, Population Division, 2008.
53 66.2% urban in 2050 versus 40.8% urban in 2007; whereas Europe was 72.2% urban in 2007 and is projected to be 76.2% urban in 2050.

.§ Fei and Zhan have no hope of getting one. Their future, and their family, will have to take place somewhere else. Millions of other workers have come to the same conclusion.
Shenzhen, on the southern mainland of China across the Deep Bay from Hong Kong, is the world’s largest purpose-built arrival city. As recently as 1980, it was a fishing village of 25,000 people; then Chairman Deng Xiaoping declared it the first Special Economic Zone, exempt from restrictions on movements of workers and freely allowed to practice capitalism, and it quickly swelled into an industrial hub whose population, by the end of the twentieth century, was officially almost nine million but more likely in excess of 14 million, owing to the masses of semi-permanent village migrants from all over China who pack its workers’ dormitories. It spawned a thriving middle class, a leading high-tech sector, and one of the best universities in China.

In the autumn of 1978, the Taiping Handbag Factory of Hong Kong opened the first foreign factory in Dongguan. Income in its first year of operation was one million Hong Kong dollars. The factory processed materials from Hong Kong into finished goods, which were shipped back to Hong Kong to be sold to the world. It established the model for thousands of factories to follow. Over the next two years, China set up four “special economic zones” as testing grounds for freeenterprise practices like foreign investment and tax incentives. The largest zone was Shenzhen, about fifty miles south of Dongguan, which quickly became a symbol of a freewheeling China always open for business. Shenzhen was a planned showcase city, willed into being by leaders in Beijing and supported by government ministries and the companies under them.
Dongguan was different.

Deni was turning dust into oil, turning land into power, and turning nickels into dollars. Here’s how he’d turn a nickel into a dollar: he worked with an immigration attorney named Eugene Wong. Eugene would be contacted by businesspeople in Indonesia who wanted to come to America. Eugene would secure them an investor visa, an EB-5. This normally requires an agreement to invest a million dollars, but three thousand EB-5s are set aside each year for investing in special economic zones. These can be had for a half million dollars. Eugene sends the money to Deni, who uses it as seed capital, and pairs it up with another $9.5 million in bank loans, which he’s free to invest in something safe and predictable, like a power plant. Thus, nickels into dollars. Is it a trick? It seems so. Too good to be true. More white man’s magic.
So where do all these dollars go? Back into education.

His best student, a young woman named Wang Huan, came from the neighboring county of Ning Xiang. Her family had lived there for centuries, scratching out a minimal existence through farming on the dry, wind-blown soil of the Loess Plateau. Not long after Huan was born, with the Chinese economy beginning to boom along the coastal areas, her parents decided to take a huge risk and leave their ancestral home in search of higher wages and greater economic opportunities in the special economic zone of Shenzhen. They had to leave Huan behind with her grandparents, which was a major sacrifice for everyone. Fortunately, her parents were successful in getting good jobs and earning some money, so they could send her to a better primary school and to the only college in the region. Huan excelled as a student at Longdong College. She was one of the few students to pass a rigorous postgraduate entrance examination, and was admitted to Xi’an International Studies University to study linguistics.

China’s urban population catapulted from about 200 million to almost 400 million people in four short, hectic years of transformation.48 China’s next urban boom began after 1992: Deng Xiaoping embarked on his historic Southern Tour of China’s southeast coastal region (during which he may have proclaimed, “To get rich is glorious”), solidified pro-market reforms as Communist Party dogma, and prompted an export-driven expansion that lured rural labor to the coast. Shenzhen, on China’s Pearl River Delta, became the modern-day Seville. A fishing village of some 10,000 people during the 1970s, it was anointed a Special Economic Zone in 1979 and reached 2.5 million inhabitants over the next decade. After the Southern Tour, growth leapt into a new gear: by the year 2000, Shenzhen’s population topped 8 million and by 2015, 10 million (or 15 million, counting migrant laborers).49 The story was repeated in dozens of other places, so that today over half of China’s population—nearly 800 million people—lives in its cities.50 In one generation, almost half a billion people—equal to the present population of the European Union—relocated.

Ten miles away from the frontier, still deep inside a China of timeless rural peace—workers knee-deep in the paddy fields, ducks straggling along the roadside, the occasional bullock-cart lumbering down a muddy lane—we passed two unexpected signs of the new, post-Mao order: a petrol station, run by Texaco (though no cars were taking advantage of it), and a tall, electrified fence, with watchtowers and a massive and well-guarded border control post, such as you might find when taking the autobahn from Vienna to Budapest.
This was not the frontier with Hong Kong, however. It was a new ‘internal’ frontier that divided the special economic zone of Shen Zhen from Marxist orthodoxies of the rest of China—the zone being a sort of halfway house, an airlock, between the rigidities of the Communist world and the laissez-faire capitalism of the Crown colony. It is a frantically busy place, with factories and tower blocks and hotels (most of them paid for by wealthy Hong Kong investors) rising out of the paddy fields, and restaurants jammed solid with a new Chinese élite who are making money on a scale of which Mao would never have dreamed.

In fact, about one-fifth of the global footprint of cotton consumption is related to pollution from wastewater from fields and factories.26
At last my T-shirt is ready to be born, and the finished cotton fabric is shipped off to the factory where this will happen. This is the stage we’ve heard the most about, on account of all the bad press that sweatshops have received. Sadly, despite the attention, the conditions for most garment workers are still horrendous. Many big brand clothing companies tend to seek out factories that pay the absolute lowest wages. Today this means places like Bangladesh and the “special economic zones” or “export processing zones” of China, where workers—squeezed into underlit, underventilated, deafening factories to perform mind-numbing, repetitive drudgery, sometimes for eleven hours a day—receive wages as low as ten to thirteen cents per hour.27 Free speech and the right to form a trade union are routinely repressed as well. Child labor, though officially outlawed pretty much everywhere, still exists in shadowy pockets, most often employed when deadlines are tight.

We interview as many workers as we can and begin to confirm a picture of a high-stress workplace marked by long hours and repetitive tasks, a factory where most hires last only about a year before quitting.
It’s no exaggeration to say that the iPhone has transformed China. On top of physically building the device, China is now one of the world’s top consumer markets too. Shanghai is fascinating—a blend of enthusiastic entrepreneurship and manufacturing muscle dominated its smartphonic tech sector. But it’s got nothing on Shenzhen.
Shenzhen was the first SEZ, or special economic zone, that China opened to foreign companies, beginning in 1980. At the time, it was a fishing village that was home to some twenty-five thousand people. In one of the most remarkable urban transformations in history, today, Shenzhen is China’s third-largest city, home to towering skyscrapers, millions of residents, and, of course, sprawling factories. And it pulled off the feat in part by becoming the world’s gadget factory.

These firms were at a distinct disadvantage, for they were saddled with redundant workers and retirement pensions.9 Nor did they serve the country’s much greater need for light industry and service enterprises. Automaking remained a state enterprise or became a joint venture with foreign firms, an arrangement that became popular for hotels as well.
China’s Economic Zones
Deng established four special economic zones on the south coast that could trade freely and accept foreign investments. These proved so successful that fourteen other coastal cities soon got the same privileges. Values changed with practices. Before the creation of these zones, the party had considered the prosperous southern province of Guangzhou tainted by Western barbarian businessmen because of its proximity to booming Hong Kong.

40 This argument is made as if we in the West are mere spectators to this reckless and dirty model of economic growth. As if it was not our governments and our multinationals that pushed a model of export-led development that made all of this possible. It is said as if it were not our own corporations who, with single-minded determination (and with full participation from China’s autocratic rulers), turned the Pearl River Delta into their carbon-spewing special economic zone, with the goods going straight onto container ships headed to our superstores. All in the name of feeding the god of economic growth (via the altar of hyper-consumption) in every country in the world.
The victims in all this are regular people: the workers who lose their factory jobs in Juárez and Windsor; the workers who get the factory jobs in Shenzhen and Dhaka, jobs that are by this point so degraded that some employers install nets along the perimeters of roofs to catch employees when they jump, or where safety codes are so lax that workers are killed in the hundreds when buildings collapse.

Materials, technology, and managers were being sent from Hong Kong and Shenzhen, and manufactured goods were generally exported from Hong Kong (actually surpassing the value of Hong Kong-made exports), although the building of new container ports in Yiantian and Gaolan aimed at diversifying export sites.
This accelerated process of export-oriented industrialization and business linkages between China and the global economy led to an unprecedented urban explosion. Shenzhen Special Economic Zone, on the Hong Kong border, grew from zero to 1.5 million inhabitants between 1982 and 1995. Local governments in the whole area, full of cash from overseas Chinese investors, embarked on the construction of major infrastructural projects, the most amazing of which, still in the planning stage at the time of writing, was the decision by Zhuhai’s local government to build a 60 km bridge over the South China Sea to link by road Zhuhai and Hong Kong.

This is evident in the first instance in the large delegations of authority to China’s provinces and municipalities to implement policies in a manner that suits local conditions. This authority often clashes with, and frequently trumps, the interests of the line ministries headquartered in Beijing.
Most Western observers focus on the reform’s creation of market incentives through the household responsibility system, which decollectivized agriculture and allowed peasants to keep a much larger proportion of their output. They also point to the creation of four special economic zones open to foreign investment. These were indeed critical: agricultural output doubled in the first four years following the reform as private incentives kicked in, and export industries were seeded in southern cities like Shenzhen. But equally important were changes in the governance structure that created a fiscal responsibility system for local governments. As political scientist Jean Oi has documented, the early gains were accomplished not by the private sector but by so-called township and village enterprises (TVEs), in which local governments essentially turned themselves into profit-making businesses.10
One of the fundamental tenets of Western public administration is that public-sector agencies are not allowed to retain earnings and thus have no incentive to control costs or perform more efficiently.

“Hong Kong is an amazing spot where lots of capitalists and free market stuff just rages,” says Bill Seiler. “I like the Hong Kong Asians a lot. They’re pretty hip and they understand American humor a lot better than the mainland Chinese. They don’t get our jokes.”
In 1978, the Chinese government began a transition from a planned economy to a market economy. Commodore began to look into the Special Economic Zones set up by People’s Republic of China. “They’d do some goofy stuff,” recalls Seiler. “I remember being at one plant somewhere in Hainan, they turned off the power for three hours one day! The government just turned it off.”
The poor infrastructure in China amazed Seiler. “If that was a private power company, they are quick to get the power back on because they are losing money if it’s not pouring into somebody’s homes,” he says.

The reason, he said, was that China was backward and needed the knowledge, the technology, and the markets that the rest of the world in general and the United States in particular had to offer.82
Although Deng was especially impressed by the rapid development of Japan and South Korea, the initial Chinese reforms had by and large been creative variations on reforms attempted by other Communist states: allowing rural households to have their own plots of land; promoting collectively owned town and village enterprises (TVEs) while permitting the development of small-scale private enterprises; modest market-oriented reforms in state owned enterprises (SOEs); regional experimentation with “special economic zones” to promote exports and induce foreign investment.83
All of this led to strong growth, but came up against the same trade and fiscal contradictions that many other developing countries had experienced. By the end of the 1980s, the rapid rise in imports of machinery and consumer goods had left China with a negative balance of trade; this, together with the stagnation of the SOEs, had led to a serious decline in state revenues.84 With the limits of the SOE reforms exposed, a broader strategic shift to the “second opening” was put in hand by the early 1990s.